Mumbai's police chief Hassan Gafoor said: 'Over 125 people have died from the hostage crisis. The situation is very fluid and the toll could rise further.'

The Indian Prime Minister has said the group behind the overnight attacks in Mumbai is based outside the country.

Manmohan Singh made a live address to the nation this morning.

He said: 'The well-planned and well-orchestrated attacks, probably with external linkages, were intended to create a sense of terror by choosing high-profile targets.'

The Department of Foreign Affairs says it has no reports of any Irish citizens injured as a result of the attacks.

Mr Gafoor said that what he described as a hostage-type situation at one of two luxury hotels stormed by gunmen - the Taj Mahal Palace - had ended.

But India's NDTV television news channel said this morning that an explosion was heard from inside the hotel, as well as a second blast elsewhere.

Commandos sent into hotels

Indian commandos were sent into the hotels following the attacks.

The commandos, with their faces blackened, moved into the Trident-Oberoi, where 20 to 30 people are thought to have been taken hostage and more than 100 others were trapped in their rooms.

There are reports that the commandos have arrested three militants, including a Pakistani national, inside the five-star Taj Mahal hotel.

An extremist group calling itself the Deccan Mujahedeen said it carried out the attacks late last night on the hotels and eight other locations, including the main train station, a hospital and a popular restaurant.

Several men armed with AK-47 rifles had stormed into the passenger hall of Mumbai's Chhatrapati Shivaji railway station, firing indiscriminately and throwing grenades.

One of the gunmen in the Trident told an Indian TV channel by phone that they wanted an end to the persecution of Indian Muslims and the release of all Islamic militants detained in India.

A Japanese businessman and an Australian were reported to be among the dead. The injured included Australian, US, British, Spanish, Norwegian, Canadian and Singapore citizens.

Hostages freed

Seven hostages have been rescued from a complex that houses a Jewish centre that was attacked by gunmen.

The nationality of those freed was not given, although television pictures of a group being led away from the complex appeared to show some foreigners.

The main Bombay Stock Exchange was closed, as were shops, schools and businesses.

An official said that the English cricket team had also decided to abandon its tour of India and return home following the attacks.

Several airlines have cancelled flights to and from Mumbai and some airlines were unable to fly planes out of the city because the crews were trapped in hotels partially occupied by gunmen, although none were reported to have been taken hostage.

Meanwhile, two Pakistani merchant vessels have been apprehended off the coast of India.